West Palm Beach is the seat of Palm Beach County and sits at the northern edge of one of the country's wealthiest and most active real estate markets. The city and surrounding county have seen extraordinary price appreciation — Palm Beach County's median single-family home price exceeded $650,000 in 2024, driven in part by high-net-worth migration from the Northeast and out-of-country buyers. Brokerages in this market often handle multi-million-dollar transactions and employ licensed agents who themselves earn substantial incomes.
That income profile creates unique health plan compliance dynamics. When a West Palm Beach real estate brokerage sets up a group health plan that covers the broker-owner and select W-2 agents, but not lower-paid administrative staff, it risks triggering IRC Section 105(h) nondiscrimination violations — with the consequence being that the brokerage's highest earners lose their health benefit tax exclusions. Understanding how these rules work is essential before your next plan year begins.
Palm Beach County's luxury residential market means many W-2 agents at larger brokerages earn commissions well above $200,000 annually. When those earners are mixed with administrative support staff earning $40,000–$60,000, the spread between HCIs and non-HCIs is substantial. This makes it especially important that the group health plan — particularly any self-insured plan — offers identical benefits to all W-2 employees, not just the top performers.
IRC Section 105(h) requires that any self-insured group health plan pass two annual nondiscrimination tests. A plan is "self-insured" when the employer funds claims from its own assets, including level-funded arrangements where the employer may bear residual claim risk. The tests are:
| Test | Standard | How to Pass |
|---|---|---|
| Eligibility Test | 70% of non-HCI employees must be eligible, or if 70%+ are eligible, 80% of eligible employees must benefit | Offer the plan to all W-2 employees with a standard waiting period |
| Benefits Test | No HCI may receive a benefit not equally available to non-HCIs | Use a single benefit schedule for all enrolled employees |
Highly compensated individuals (HCIs) include: the five highest-paid officers of the employer, employees holding more than 10% equity in the business, and the highest-paid 25% of all employees. At a West Palm Beach brokerage where top agents earn seven-figure commissions, the 25% threshold can capture a broader group than at smaller markets — and the stakes of plan failure are higher because more high-earner income is at risk.
Many West Palm Beach real estate brokerage owners operate through S-corporations. For S-corp owners with more than 2% ownership, health insurance premiums paid by the corporation are included in the shareholder's W-2 wages under IRC Section 1372. This interacts with 105(h) in a nuanced way: the S-corp shareholder is treated as an employee for purposes of the plan, and the premium inclusion in wages may affect the compensation calculations used to determine HCI status and the benefits comparison for testing purposes.
The majority of West Palm Beach brokerages with fewer than 50 full-time equivalents purchase fully-insured group coverage, which is not subject to IRC 105(h) testing in the same way. However, ACA Section 1557 applies to all health programs receiving federal financial assistance — including most employer-sponsored group health insurance carried through federally-participating carriers. Section 1557 prohibits discrimination based on race, color, national origin, sex, age, and disability in covered health programs.
For a West Palm Beach brokerage with a diverse international workforce (common in South Florida real estate), Section 1557 compliance means ensuring that enrollment communications, plan materials, and benefits administration are accessible across language barriers and do not apply different terms to employees of different national origins or ethnicities.
Talk to a licensed advisor about health plan nondiscrimination compliance for your West Palm Beach Real Estate Brokerage.